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Post by Deleted on Oct 15, 2015 7:15:29 GMT
given the vast amount of capital swirling through the planet following QE of various types around the world, the pressure for the Chinese to sneak their cash out of the country and the general fighting exchange rates down at the moment the days of 10% rates as the norm are a fair bit away, still UK managing yet more employment might just be a signal that a harbinger of a change is coming.
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Post by marek63 on Oct 15, 2015 7:55:19 GMT
At this stage of the business cycle, lending on loans longer than 3 years in duration is brave IMHO. Keeping overall duration of loans to around 20 months in P2P.
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sl75
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Post by sl75 on Oct 15, 2015 8:29:00 GMT
All sell-outs performed previously were given the quote and given a "Take it or not" offer with a clear message of costs and capital to be repaid. Anyone who sold out accepted the offer and the calculation at that time, even if the exact mechanics were not published. Sure, but the exact (non-published) mechanics were previously different to what you quoted as being in 6.4.1 (and which I re-quoted). If the mechanics have indeed changed to what you quoted, I was congratulating you (or RS) on finally seeing sense. In the meantime, however, if anyone is considering using sellout, I'd suggest they calculate the fee themselves exactly as stated in the current version of 6.4.x, based on the CAPITAL being sold out, using THAT as the basis of their decision. If the offer from RS has a higher fee, demand a refund for the difference (if RS are indeed calculating their fee the way they say they do, there'll presumably be no complaints or demands resulting from this suggestion). Be prepared to take it to the regulator including a copy of the T&Cs at the time you performed the sellout...
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pikestaff
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Post by pikestaff on Oct 15, 2015 8:45:31 GMT
At this stage of the business cycle, lending on loans longer than 3 years in duration is brave IMHO. Keeping overall duration of loans to around 20 months in P2P. Is that because you see rates going up significantly (minimal risk in my view) or because you see defaults going up? Do you differentiate between sectors or do you see similar risks across the board?
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Post by marek63 on Oct 15, 2015 9:21:56 GMT
At this stage of the business cycle, lending on loans longer than 3 years in duration is brave IMHO. Keeping overall duration of loans to around 20 months in P2P. Is that because you see rates going up significantly (minimal risk in my view) or because you see defaults going up? Do you differentiate between sectors or do you see similar risks across the board? I agree on nominal rates over a 2 year horizon, but for me it is more about liquidity and being able to cope with market shifts, particularly in property. CBRE are suggesting the commercial property market will stay good until 2018. I am more worried about what the economy may look like in 3-5 years time - being invested in 5 year loans would be a a significant exposure to 2018-20 economics which are just unknown. Keeping average loan duration to under 2 years limits the forward economic risk. Personally I am in the 'secular stagnation' camp plus worries about tail risks given the amount of increasing leverage globally. Whether that tail risk is lack of petro dollars being re-invested as oil prices are low, currency wars or just a minor real war then there are a lot of worrying scenarios out there that can see an aversion to refinancing loans - and a lot of P2P is about investors acting as a bridge into refinancing deals; that requires market access, and in a negative economic climate that market access disappears. Lehman failed through inability to refinance... One scenario for future downside in P2P is that for whatever tail risk reason, refinancing starts to become difficult. Then: 1) Property loans will be defaulting into delayed payments with no interest paid for 6-12 months perhaps 2 years as projects are not resold/refinanced. So a hypothetical 'high quality holiday home in Dorset after redevelopment over 5 years' would be very unattractive to me at present. Short term conversions into the current rising market under 12 months make sense. Extension and default 2) Renewable loans will not be refinanced but will continue to pay interest from FIT tariffs. So extension not default. 3) Small business loans will default more as investment and consumer spending is withheld. Just default. 4) Trade Finance loans will repay but the volume will fall away as new orders fall. Sector shrinkage. HTH PS this is probably not on the correct thread as it has nothing much to do with the RateSetter model!
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pikestaff
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Post by pikestaff on Oct 15, 2015 15:39:01 GMT
marek63 I agree with your thoughts on refinancing risk. Definitely the wrong thread but never mind!
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james
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Post by james on Oct 16, 2015 19:03:04 GMT
Am I missing anything from the myriad ways in which RateSetter can make money from lenders who sell: 1. The lender funded a longer term loan and the replacement lender also funded the longer term loan on which RateSetter presumably took a larger fee, margin and/or provision fund payment than on a shorter term loan. RateSetter will take from the seller the difference in the shorter and longer term interest rate anyway, even though RateSetter made or is making its own money on the longer term rate. 2. In addition, the change in rates due to a drop in interest rates will be taken by RateSetter. 3. There may also be a 0.25% fee. 4. This can be done many times for the same piece of the loan if there's an active secondary market. Meanwhile the original lender: A. Funded the long term lending and took the associated interest rate risk. B. Took the risk of default if the protection fund had failed. C. Took the risk of a lack of buyers. I don't know about others but given that RateSetter has presumably had the benefit of what I presume to be higher profit levels on th elonger term loan it's not correct to describe this as a "fair" system. RateSetter is claiming a disadvantage for something that is actually an advantage to RateSetter: more funding for longer term loans. Assuming, that is, that interest rates, RateSetter fees or provision fund payment levels are higher for longer term loans. Which may not be true at times, particularly the interest rate part. Based on the above my views are in part: a. The claim in the email "Want to earn the 5 Year rate but concerned about putting money away for years? Don't worry, with our Sell Out feature you can access your money at any point for a small fee" is false and misleading, breaching the FCA promotion requirements, and lenders who feel they have been mistreated should complain to RateSetter and if necessary to the Financial Ombudsman Service, seeking a refund of the difference between the fee and what was actually deducted. It is not enough for the contracts to be right, the marketing material must be true and lenders are entitled to rely on the marketing material. Particularly when, as in this case, it is clearly seeking toe encourage longer term lending by claiming that the cost of selling will just be a small fee. I assume that this will be slam dunk success if it ever gets to the FOS: the claim is clearly false and RateSetter knew it (even if the marketing people doing the writing didn't). westonkevRS, would you be kind enough to consider passing that on to marketing and compliance so they can stem the potential money flow and lender misinformation ASAP by getting the text changed? Unless of course you or they disagree with my analysis. b. the claim that it's fair is misleading. RateSetter also got a benefit from the longer term and it's not something that it has to be compensated for. But this is not something for which I think any redress would be due, it's just not really accurate because it doesn't reflect the whole balance of money flows potentially involved, portraying just the part that the lender might think seems fair without so much on the ways in which both RateSetter and the buyer of the loan can be making more money as a result of the initial financing of a longer term loan. c. the use of a charging approach to discourage an active secondary market via the costs to sellers is interesting, given that an active secondary market is quite often portrayed as a significant benefit of platforms. I wonder just how much money RateSetter is losing as a result of this approach, whether in loan charges or just in flat secondary market fees forgone due to lower secondary sales volumes than there might otherwise be. And whether it's a net gain or loss in revenue for RateSetter to do it this way.
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Post by westonkevRS on Oct 17, 2015 11:51:10 GMT
I guess (as I'm no legal guru) that it all comes down to your definition of "small fee". I've seen fees ranging from 0.25% to 3.70% depending on market rate movement and duration into agreement. Personally I think the fact you can get out at all indicates these fees could be considered small in the overall context. Hardly a "slam dunk"
Sometimes I do feed back forum insight to the relevant team at RateSetter. But not in this case. If anyone has a legitamate complaint about their account (rather than an anonymous consumer champion's viewpoint) they should direct the complaint directly to RateSetter Customer Services. An anonymous internet forum is not the place to register a complaint, which are subject to specific regulatory processes.
Kevin.
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Post by westonkevRS on Oct 17, 2015 12:04:12 GMT
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Oct 17, 2015 12:32:04 GMT
Slightly lost here Kev, this seems to reflect quite positively on the BS, money returned with interest and no fees. (Whether this was the result of the nasty DM intervening is unclear)
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shimself
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Post by shimself on Oct 17, 2015 13:12:30 GMT
I guess (as I'm no legal guru) that it all comes down to your definition of "small fee". I've seen fees ranging from 0.25% to 3.70% depending on market rate movement and duration into agreement. Personally I think the fact you can get out at all indicates these fees could be considered small in the overall context. Hardly a "slam dunk" Sometimes I do feed back forum insight to the relevant team at RateSetter. But not in this case. If anyone has a legitamate complaint about their account (rather than an anonymous consumer champion's viewpoint) they should direct the complaint directly to RateSetter Customer Services. An anonymous internet forum is not the place to register a complaint, which are subject to specific regulatory processes. Kevin. I think "small fee" should probably be measured in monthsworth of interest, making 3.7 rather steep. I think an interet forum is the perfect place for customers to feedback what they feel is disappointing practice by the company, I'm surprised you take it so personally.
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james
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Post by james on Oct 17, 2015 13:35:07 GMT
I guess (as I'm no legal guru) that it all comes down to your definition of "small fee". I've seen fees ranging from 0.25% to 3.70% depending on market rate movement and duration into agreement. Personally I think the fact you can get out at all indicates these fees could be considered small in the overall context. Small to me would be perhaps £1 to £25 or 0.25%, whichever is lower. It wouldn't be something in the region of 20-30% of the value being sold, which is the sort of level that might be expected for a sale after a year and a couple of percentage points of interest rate rise. 0.25% because the total annual cost for managing money in funds is around 0.05-1.5%, and an IFA would often be able to do a full financial analysis for 1-1.5% for larger amounts. So far as possible "not small" definitions go, Consumers Association just published a financial advice cost survey where they found that while 20% would be willing to pay for advice about investments only 6% would be willing to pay £500 or more, which tends to imply to me that £500 is not considered a small amount even for the quite significant work involved in providing personal financial advice. The assurance that the investment can be sold at any time and the potential level of the exit fee cause me to have that opinion. I wouldn't say that all are slam dunks because I might consider some to be genuinely small. It's something a customer can quite readily test, though, since RateSetter might consider the FOS fee to be small and not mind paying it to get an independent opinion on a customer unhappy about a £50 fee not being small. If RateSetter say has a practice of not letting things go to FOS when the amount in dispute is below the FOS fee that would imply to me that RateSetter doesn't consider the FOS fee to be small, ignoring for the moment the complaint count issue.
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james
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Post by james on Oct 17, 2015 13:47:17 GMT
And this is how you can expect to be treated by Banks and Building Societies legitimized by FSCS membership into giving terrible returns and harsh T&Cs. The building society product description presumably said that it was a fixed term deposit and no exit was possible. The RateSetter email said that exit at any time is possible and that the fee involved is small. The building society would normally be expected to use the money to fund lending and would presumably not be able to instantly replace it for say 3.5 years of term for a replacement term deposit customer. RateSetter requires that there be a purchaser for the remaining capital balance on the loan less any deductions for interest rate increases before the sale can happen. So some substantial differences in exit availability descriptions and whether the other party involved suffers a loss of use of the money.
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am
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Post by am on Oct 17, 2015 17:57:08 GMT
My estimates are the exit fees on the 5 year market peak at over 5% (at 35 months and 59 months), before assignment fees. Someone who has their hands on the actual data on interest rates, and knows how the difference in interest rates is calculated, could "stress test" for various scenarios (lending at market rate, and various rates below (e.g. lend now) and above (e.g. your rate) market rate). (RateSetter could actually run it over their whole loan book, and see what the distribution of exit fees would have been for exits at monthly points in the past).
The level of assignment fees is not predictable, but interest rates are expected to start rising sometimes, and it doesn't take much in the way of a percentage points rise to generate a hefty assignment fee. Even if interest rates don't rise what happens to someone who lent during the last cashback if they want to exit in a couple of years time? The saving grace would be if money was re-lent in a shorter, lower paying market, so if you manage to hold for 2 or 4 years this compensates for any rise in the general level of rates.
My opinion is that it's pushing to call the worse case exit fee (before assignment fees) small, and that I have no confidence that the exit fees including assignment fees can be guaranteed to be small. I never accepted the assurance of the ability to exit for a small fee (and therefore only have token amounts in the longer term markets - if you trust FC's loss predictions you can get higher returns and lower exit costs on FC); other people may have accepted it.
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Post by Deleted on Oct 18, 2015 11:06:59 GMT
The trouble I have with most direct complaints to most organisations is
1) they are hard wired into legal 2) they are in disconnect with any entrepreneurial spirit 3) they often don't know what changes are coming, only what they have on their plate right now 4) the word anodyne comes to mind
certainly I have contacted 3 P2P portals by email recently (no names)
1) one was useless and I got more advice on this site 2) one was dismissive (i'll let you guess), decision now made on that account 3) one didn't get the point and so enraged me I had to ring them, at which point they actually did a good job of admitting their errors, decision made on that account
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